Our client missed his required minimum distribution for 2001. I know there is a 50% penalty for the failue to take it.

My question is this:

If our client does not make the correction, does the penalty apply for each subsequent year that the amount is not withdrawn (similar to the excise tax on excess contributions), or is it a one time only penalty.

It is my understanding that it is a one-time penalty unless the required distribution was the final one using the five-year rule.

The statute of limitations will not run on the penalty until you file Form 5329 and report it. The IRS has been very fair in waiving these penalties but one of the requirements for a waiver is that the excess amount be withdrawn.